There are currently about 13 million substance abusers in the
United States,1 and it is estimated that substance abuse cost the U.S.
economy $229 billion in 1990.2 (Substance abuse is defined as the use
of illicit substances or misuse of controlled substances, alcohol, or
other psychoactive drugs.)

Recent data clearly suggest a major problem facing American
employers. More and more dollars are spent on employee substance abuse
treatment costs while work time is lost and productivity is reduced
because of an employee's incapacity induced by substance abuse. To
help counter this trend, employers have been adding benefits to their
medical care plans to treat the acute effects of substance abuse and to
assist individuals in altering their behavior.

According to data from the Bureau of Labor Statistics'
Employee Benefits Survey, participation in plans providing substance
abuse coverage has grown dramatically since 1983, the first year for
which data are available. In that year, a little more than one-half of
all participants had coverage for some form of alcohol abuse care. By
1989, approximately 97 percent were covered for alcohol abuse services.
Similarly, 43 percent of health plan enrollees had drug abuse coverage
in 1983; in 1989, the figure had risen to 96 percent. (See chart
1.)'

Benefits provided for this type of care are, however, less
comprehensive than those for other illnesses. Plans typically impose
limits on the duration or cost of coverage, beyond those applicable to
other illnesses. For example, a plan may impose a 30-day per year limit
on inpatient substance abuse treatment or restrict expenses for all
substance abuse care to $10,000 per lifetime.

The Employee Benefits Survey in medium and large private industry
establishments provides a vast amount of detail on benefits provided for
substance abuse treatment. In addition, the survey provides extensive
data on other health care benefits such as hospitalization, surgical
care, and physician's services. The 1989 survey studied full-time
employees in a sample of 2,047 establishments, which represented more
than 109,000 establishments employing 32 million full-time employees.
These data cover private industry establishments with 100 or more
employees in all States except Hawaii and Alaska.4

Substance abuse in the workplace

Data on substance abuse in the workplace indicate the cause of
employer concern and action. The National Institute on Drug Abuse 1985
Household Survey showed that among the 20to 40-year-old employed
population, 29 percent responded that they had used illicit drugs within
the past year and 19 percent, within the past month. Of those
respondents reporting current drug usage, 16 percent used marijuana and
5 percent admitted cocaine usage.5 Some experts estimate that up to 20
percent of all employees have used illegal drugs in the workplace.6 In
addition, 1984 alcohol abuse data indicate that 1 in 5 male workers had
a serious drinking problem and 1 in 10 male workers displayed alcohol
dependence. Alcohol abuse among female employees is lower, but recent
medical studies suggest that women may experience more severe alcohol
dependency as die result of metabolic differences in the initial
absorption process. Finally, the incidence of multiple drug use must not
be overlooked. It is estimated that 15 to 20 percent of alcohol abusers
are "polydrug abusers."7

Employees who are substance abusers can represent either a direct
or indirect cost to employers. Substance abuse and related mental health
treatment cost the Nation $38 billion in 1988, and accounted for 7
percent of total health care expenditures. Costs for such care are
increasing at approximately twice the rate of medical inflation, and
faster than any other component of health care expenses. More than
one-half of this cost is paid by employers through private health
insurance premiums. According to employers who were surveyed nationwide,
their direct costs for the treatment of substance abuse problems
increased by 18 percent from 1988 to 1989, while the average cost per
employee rose from $207 to $244. Recent surveys of public and private
employers show that substance abuse treatment averages 5 to 15 percent
of total employee health plan CoStS.8

in addition to the direct and indirect cost to employers of
substance abusing workers, there is also the cost of not treating
substance abuse. The health insurance costs associated with the
treatment of AiDs Acquired Immune Deficiency Syndrome)10 are enormous,
and with a new generation of infants born with Fetal Alcohol Syndrome or
as cocaine babies," the ultimate cost to employers in particular
and society in general is staggering. Future costs to employers of not
effectively treating substance abusers may also include payment of
premature life insurance benefits, long-term disability income payments,
and pension plan disability, death, and survivor payouts. The costs of
abuse can be a serious threat to the competitiveness, profitability, and
quality of American business. 11 Employer response. Prior to the
1970's, it was standard practice for private insurance policies
specifically to exclude coverage under the heading of substance abuse
treatment. Instead, health insurance plans typically covered specific
symptoms of alcohol and drug abuse, such as cirrhosis, pancreatitis,
heart disease, and ulcers."

During the mid- to late 1960's, however, limited coverage of
treatment specifically for alcohol abuse began to appear. In 1964, the
Kemper Insurance Companies added alcohol treatment coverage to the
health plan for their own employees. Blue Cross-Blue Shield began
offering a similar benefit to their subscribers by 1969.11 Such benefits
were limited, however, as policies typically restricted the availability
of coverage through exclusions and limitations.

Mandates enacted. Efforts to improve access to medical care
benefits for employees with substance abuse problems have led, in recent
years, to State-legislated mandates, requiring insurers to provide
coverage. Currently, 24 States and the District of Columbia require
private insurance plans to provide some type of coverage for
alcohol-related treatments, while 16 other States have mandated coverage
for both alcohol and drug abuse.14 Mandates vary between States-some
providing for a specified number of days or treatment sessions to be
covered, others establishing a minimum dollar amount of coverage that
must be provided, while others merely require insurers to offer
substance abuse treatment benefits as an to those purchasing medical
care policies.5 Types of treatment. In 1989, substance abuse treatment
benefits were widespread. Benefits for alcohol and drug abuse treatment
are provided for both detoxification and rehabilitation. (See the
appendix for details on types and locations of substance abuse
treatment.) Table I describes the incidence of benefits for
detoxification and rehabilitation for those participants with some form
of alcohol and drug abuse treatment coverage; it also compares coverages
of substance abuse treatment with that of other illnesses.

Virtually all participants in plans with alcohol and drug abuse
benefits were covered for inpatient (in-hospital) detoxification.
Detoxification is generally considered to be a medically necessary health benefit and is therefore rarely excluded from coverage. In
contrast, rehabilitative care is often not considered medically
necessary by the insurer, and is thus covered less frequently than
treatment for detoxification. Two-thirds of the participants with some
type of alcohol coverage had provisions in their plan for inpatient
rehabilitation treatment. Coverage for outpatient alcohol treatment,
generally rehabilitative care, was slightly less common than inpatient
rehabilitation.

Coverage patterns were similar for inpatient and outpatient drug
abuse benefits. Limitations In virtually all plans, provisions for
alcohol abuse treatment were the same as those for drug abuse treatment.
Thus, the remaining discussion will cover alcohol and drug abuse
treatment as one benefit, substance abuse care.'6 For example, a
plan may impose a limit of 20 days per year for all outpatient substance
abuse treatment and 30 days per year for all inpatient care.

The following tabulation indicates the percent of plan participants with alcohol abuse treatment coverage by how their plan covers drug
abuse treatment:

Note that drug abuse treatment is nearly always covered under plans
that also covered alcohol abuse treatment; no plans were found that
solely covered drug abuse.

Benefits for substance abuse treatment have traditionally been more
limited than benefits for other illnesses. Coverage for inpatient
detoxification, however, is more likely to be treated the same as other
conditions than either inpatient rehabilitation or outpatient care.
Slightly more than 40 percent of die participants with substance abuse
coverage had inpatient detoxification benefits covered the same as other
illnesses. In contrast, fewer than 10 percent of participants had
provisions for inpatient rehabilitation and outpatient care that were
identical to those for other illnesses.

There appear to be several reasons why insurers provide more
restrictive coverage for substance-abuse benefits than for other
illnesses. First, there are still strong social beliefs holding that
substance abuse is not a legitimate illness, but rather a self-inflicted
condition for which treatment should not be covered under medical care
benefits. Second, it is difficult to determine an actually based premium
for substance abuse benefits." It is also difficult to estimate die
incidence of the disease, the responsiveness to treatment, or the
ultimate cost and duration of treatment. Finally, some commercial
insurers question the various nontraditional treatments currently in
vogue, such as that delivered by nonmedical counselors and case managers
without physician supervision."

Typically, medical care plans impose limitations that apply just to
substance abuse treatment. Such separate limitations frequently included
restrictions on the annual number of days of inpatient care, the number
of outpatient visits per year, and the maximum dollar amounts of
benefits to be paid by the plan per year or per lifetime.

Benefit limitations vary significantly. One important factor in
determining benefit limitations is the type of medical care plan.
Traditional fee-for-service plans, which reimburse patients or providers
after care is received, typically limit available inpatient substance
abuse treatment to a maximum number of days per year. (To a lesser
extent, limits are placed on the number of days of coverage per illness
or per lifetime.) In contrast, prepaid health maintenance organizations
(HMO's) are more likely to impose an annual limit on inpatient
days, but less likely to limit days per illness or per lifetime than
fee-for-service plans.19

A high percentage of participants in all types of plans providing
outpatient substance abuse benefits had restrictions placed on the
annual number of treatment days available. Traditional plans frequently
specified the maximum dollar amount die plan would pay for substance
abuse treatment over some time period, while HMO's did not
generally impose such limits. However, HMO's tended

to apply copayment provisions, requiring subscribers to pay a nominal
fee before receiving services for outpatient care; traditional plans
rarely had such features.

Generally, HMO's cover inpatient and outpatient substance
abuse treatment in full, but limit the annual number of days; such plans
cover outpatient substance abuse care up to an annual number of days
while imposing a copayment per visit. In comparison, substance abuse
coverage in fee-for-service plans typically is subjected to overall plan
limitations, that is, limitations applying to several medical procedures
and services. The three main overall limits are: deductibles,
coinsurance, and maximum dollar coverages. A deductable is the dollar
amount of initial medical costs that the plan enrollee must pay before
the policy will begin reimbursing expenses. In 1989, the individual
deductable usually was $ 100 or $200 per year with a family limit of 2
or 3 times the individual amount. Under coinsurance, covered expenses
are shared between die individual and the plan, with the insurer
typically paying 80 percent of the total. Finally, most medical plans
impose a lifetime dollar maximum on health insurance coverage, commonly
$500,000 or $ 1,000,000.

Beyond these general provisions, limitations on days of coverage is
one means by which insurers restrict benefits provided for substance
abuse treatment. Tables 2 and 3 describe the incidence and duration of
such limitations.

For participants with inpatient coverage, 44 percent had day
limitations imposed. There was no difference in the incidence of such
limits between HMO and fee-for-service plan participants. Day
limitations for inpatient care were nearly always separate from those
imposed on outpatient coverage in both types of health care providers.

Fee-for-service plan participants most commonly had policies
limiting inpatient days for substance abuse on a per year basis,
frequently to 30 days. Restrictions on inpatient days per illness and
per lifetime were less frequently observed.

Coverage patterns for HMO participants were similar to those
fee-for-service participants, although when day limits applied, they
were nearly always covered subject to an annual maximum. Illness and
lifetime restrictions were less common. A limit of 36 days per year for
inpatient care was by far the most common feature. This mirrors typical
treatment patterns, which frequently include a 28- or 30-day inpatient
detoxification and rehabilitation program.

Slightly more than half of HMO enrollees with outpatient benefits
had ceilings on days of coverage, while fewer than one-third of
fee-for-service plan participants with outpatient benefits had such
ceilings imposed. In HMO's, these limits were usually 20 days
annually. Rarely were there outpatient day limits on a per illness or
per lifetime basis for HMO's. In fee-for-service plans, the most
frequent provision was an annual outpatient limit of 30, 35, or 50 days.

Plans may further restrict coverage for substance abuse treatment
benefits by placing ceilings on the maximum dollar amount paid by the
plan. Tables 4 and 5 illustrate these limitations. As previously noted,
HMO's seldom limit coverage for substance abuse treatment benefits
through maximum dollar restrictions.20 Consequently, the discussion of
dollar limitations is confined to those found in fee-for-service plans.

Seventy percent of the fee-for-service participants with uniform
substance abuse benefits had no limitations on the dollar value of
inpatient care. Where inpatient dollar maximums were imposed, they were
generally combined with outpatient treatment. This is in contrast to day
limitations, where combined inpatient and outpatient maximums were rare.
Dollar maximums of $25,000 or $50,000 per lifetime for all substance
abuse treatment were commonly observed provisions.

Outpatient care was more likely to be restricted by a dollar
maximum than inpatient care. This includes plans that impose an overall
dollar maximum on all substance abuse care plus those with a separate
outpatient dollar maximum. In addition, some plans had both an
outpatient substance abuse dollar maximum, for example, $2,000 per year,
and a total substance abuse dollar maximum, such as $50,000 per
lifetime. Treatment must fall within each of those restrictions be paid
for by the plan.

As a rule, HMO's place restrictions on outpatient care through
employee copayments per visit rather than on maximum dollar payments.
Table 6 shows the percent of participants in HMO plans with outpatient
substance abuse copayment provisions. Just over two-fifths of enrollees
had outpatient services subject to a copayment, generally $5, $10, $20,
or $25 per visit. IN SUMMARY, substance abuse is a serious problem in
America. In fact, a Gallup poll ranked drug use as the Nation's
number one problem.21

As a rapidly accelerating component of health care costs, charges
for alcohol and drug abuse treatment are helping to drive up medical
care expenses. The substance abuse crisis is also affecting employers,
both public and private, who are struggling to provide needed health
benefits while controlling spiraling plan costs.

Despite the upward pressure on health costs, the problem is so
serious that there has been a steady increase in the incidence of
coverage for substance abuse treatment in employer-provided medical care
plans, to the point that virtually all plans now provide some benefits.
Nevertheless, health plans typically cover substance abuse treatment on
a more restrictive basis than other illnesses. This may change, however,
as the interest in, and the need for, comprehensive substance abuse
treatment benefits grows.

Footnotes

National Household Survey on Drug Abuse, 1990.

Substance Abuse Issues (Marsh and McLennan Cos., Winter 1990).

The relatively large increase in the incidence of substance abuse
benefits between 1988 and 1989 is due not only to the greater extent of
such benefits in health insurance plans, but also to improvements made
in the survey's methods for tabulating detoxification benefits.
Private industry data are not available for 1987, because the survey
examined only State and local government benefit plans in that year. The
extent of substance abuse coverage and details of plan provisions among
government employees in 1987 was similar to the private industry data.

The Employee Benefits Survey is an annual study of the incidence
and characteristics of employee benefits, The survey provides data for
the following employee benefits: health care, life and disability
insurance, retirement and capital accumulation plans, paid and unpaid
leave and a variety of other benefits. Data are presented for all
full-time workers and separately for three broad occupational groups:
professional and administrative, technical and clerical, and production
and service workers. The results of the most recent survey are available
in Employee Benefits in Medium and Large Firms, 1989, Bulletin 2363
(Bureau of Labor Statistics, 1990).

10 The Centers for Disease Control report that as of September
1987, 14 percent of all reported cases Of AIDS are transmitted through
the sharing of contaminated needles by intravenous drug users. See
Robert P. Galea, Ph.D., Benjamin F. Lewis, Ed.D., and Lori A. Baker,
M.A., AiDs and IV Drug Abusers-Current Perspectives (Owings, MD,
National Health Publishing, 1988), p. XXVI.

15 It should be noted that these mandates only apply to
employer-sponsored health plans. Under the Employee Retirement Income
Security Act of 1974 (ERISA), self-insured plans are exempt from
coverage mandates for all types of care, including alcohol and drug
abuse treatment.

16 Plans in which substance abuse benefits differed often had
varying limits on coverage between alcohol and drug abuse care. For
example, when inpatient alcohol detoxification and rehabilitation were
restricted to 30 days per year, inpatient drug benefits were covered for
only 20 days annually. Also, there were some plans that covered alcohol
detoxification and rehabilitation services but only provided drug
detoxification treatment.

17 An actuarially based premium uses insurance mathematics and the
application of statistics to determine an appropriate level of benefit
funding, based on the projected use of certain benefits.

18 is Broadening the Base of Treatment for Alcohol Problems, pp.
424-25.

19 A traditional fee-for-service plan reimburses enrollees or
providers for expenses, subject to various limitations, incurred in
connection with illness or injury. Few, if any, restrictions are placed
on the choice of providers or facilities. Preferred Provider
Organizations are a specialized type of fee-for-service arrangement in
which participants may use providers and facilities of their choice, but
are reimbursed at higher rates when using designated providers. For
tabulation purposes in this article, Preferred Provider Organizations
are included with fee-for-service plans.

Health Maintenance Organizations function on a prepaid basis by
providing a predetermined set of benefits for a fixed cost to enrollees.
The choice of providers and facilities is generally limited to those
affiliated with the organization.

20 Because HMO's provide services on a prepaid basis, and
patients are not charged for individual services, dollar limitations
have little effectiveness in controlling the use of services. Instead,
typically limit the number of times a patient can receive services, or
control usage by requiring that certain treatment be recommended by a
primary physician.

21 Nancy L. Hodes, "Drugs in the Workplace: New York State is
meeting the challenge," Employee Benefits Journal, March 1990, p.
21. APPENDIX: Approaches to substance abuse treatment The treatment of
substance abuse involves a wide range of approaches and settings, with
wide variations in cost. For example, it can cost as little as $8 per
visit to an outpatient substance abuse clinic in California and more
than $450 per day for acute care in a general hospital in the Midwest.

The following describes the most common types of substance abuse
treatment providers, the approaches involved, and their costs.

Inpatient hospital care

Typically, both general and psychiatric hospitals provide
detoxification and other substance abuse services, including
rehabilitation, on an inpatient basis. Detoxification involves
supervised medical care designed to reduce or eliminate systematically
the symptoms of substance abuse, with treatment occurring in a hospital
or other short-term facility. Rehabilitation generally follows
detoxification and entails a variety of services intended to alter the
behavior of chronic abusers. Treatment in hospital facilities is usually
more expensive than in most other settings. A 9-day detoxification stay
can cost $3,000 or more. For a standard 28-day inpatient rehabilitation
program involving patient counseling, group therapy, and other services,
costs can range from $6,000 in a public treatment center to $30,000 in a
private specialized psychiatric hospital.

Day/night treatment centers

These facilities offer outpatient detoxification and rehabilitation
care on a much less costly basis than in hospitals. Outpatient
detoxification typically averages 6.5 days at a cost of between $175 to
$388 per treatment. Outpatient rehabilitation lasting 2 weeks can
average between $1,000 and $2,000. Specialized inpatient treatment
centers These settings focus almost exclusively on the rehabilitation of
abusers. Detoxification is usually required before admittance.
Residential treatment centers are nonmedical facilities where substance
abusers are provided residential support along with ambulatory care,
such as counseling, group therapy, and other related services.
Residential treatment facilities typically charge about $125 per day.
However, more expensive programs can charge $25,000 to $10,000 per
28-day stay.

Organizations such as Phoenix House and Second Genesis provide
nontraditional approaches to substance abuse treatment. These providers
use encounter group confrontation and what some critics call "scare
tactics" to achieve behavior modification in abusers, hopefully
resulting in a lifelong abstinence from substance abuse. Information on
die various types of substance abuse treatment providers can be found in
Substance Abuse Issues (Marsh and McLennan Cos., Summer 1990).)

COPYRIGHT 1991 U.S. Bureau of Labor Statistics
No portion of this article can be reproduced without the express written permission from the copyright holder.